Yen Kai's Idea Cast

Time flies and before you know it, the second year of my SOR-pegged loan is drawing to an end. The chart above shows my home loan interest rates over the past 2 years.

As promised, here are the details of the loan packages i have been offered:

Bank A (Refinancing, quoted on 12 Feb)

Here’s a newsworthy event – The 3-month SOR fell to 0.44% yesterday. This is a whopping drop of 1.1% over the last 3 days! This makes SOR more attractive than SIBOR (3-month) which continues to hold at 0.69%. In fact, at 0.44%, the 3-month SOR is at the same level as the 1-month SIBOR. The fall in SOR might have something to do with the falling US dollar.

The recent property buying frenzy has given rise to increased interest in interest rates, as evident from the higher traffic volume to this blog (thanks for visiting!). I reckon it’s time to do a roundup on interest rates.

SOR hits yet another low, at 0.59%. And this happens on my SOR-pegged home loan re-pricing date, bringing the interest rate down to 1.35% for the next 3 months. This is simply amazing. Previously i had been very tempted to switch over to the home loan package pegged to the 1-month SIBOR rate which, at 0.44%, plus the 0.85% margin the bank charges (for 1 year lock-in), stands at 1.29% overall. Compared to that, the interest rate i am getting, at 1.35% fixed for 3 months (3-month SOR) isn’t too bad at all.

SOR just broke through the previous recorded low of 0.68% set on 27 Nov 2008 to hit 0.67% on 27 May 2008, exactly half a year later. One of the driving factors for this is of course is the diving Libor, which happens to be hovering at a range (0.66-0.68%) similar to SOR.

As you can see, the two are somewhat correlated, with the Ten Year Treasury Note Yield (TNX) leading. Watch out for the recent rise of the TNX.

Quite a bit has happened in the past few weeks. The Federal Reserve took the unconventional step of buying treasuries in a bid to lower interest rates. It seems to have worked, as mortgage rates in the US to fell to a record low. Analysts expect Bernanke to continue buying treasuries and keep rates low.

SOR has been on the rise, probably in tandem with Libor as well as USD/SGD exchange rates, while SIBOR continues to hold still at 0.69%. This highlights the difference between market vs. policy driven interest rates.

My 4th and last SOR pegged Home Loan repricing for the year has just come to past. The re-priced interest rate moved up by 0.16% compared to the previous rate, which is a pity, but on the whole it is still not too bad. The chart above shows my home loan interest rates over the past year.